We will be in this area Oct 10-11, 2005. We would like to do some day trips to see the foliage. Which town should we stay in, or does it really matter? I know they're only a half hour apart or so...

Stowe by all means. Much more scenic, great restaruants and central to many attractions, etc.

Montpelier is Vermont's capital and is a bustling town during the week. It quiets down on weekends. Lots of really good restaurants thanks to the New England Culinary Institute being in town. Some good shops too. Centrally located for lots of day trips.
Stowe is a tourist-oriented town. Lots and lots of hotels/motels and lots of dining options. Easy access to the mountains for outdoor activities. Also a good central location for day tripping.
Can't recommend one over the other as they are both fine choices. I guess it comes down to what will fit your needs/wants best.

I live in Stowe and definitely recommend you stay there. You will be in the midst of the most gorgeous foliage and can take an easy day trip to Montpelier if you wish.

You are comparing apples to oranges. Stowe is a mountain ski town, surrounded by fabulous scenery; Montpelier is a small city with some nice restaurants and shopping. I would choose Stowe, and take a day trip to Montpelier.

You might be driving thru Montpelier to get to Stowe. Enjoy lunch at the Main Street Grill operated by the Culinary Institute, do some shopping. Enjoy the shops in Waterbury on the way to Stowe. If you want an unusual "hiking" activity, check out the Great Vermont Corn Maze in Danville. Expect to spend a couple of hours. View from the top is nice.